Unemployment has fallen steadily since 1997 - but how much of that is down to Labour policy?

BACKGROUND

UK unemployment is at its lowest level for 25 years.

In March, the number of people claiming unemployment benefit dropped below 1m for the first time since 1975, and remained their in April.

The jobless total stands at 1.5 million, about 5% of the working population, according to a broader measure, the Labour Force Survey.

It is, perhaps, a sign of the times that 1 million unemployed - seen as a disaster when that figure was reached in the 1970s - is this time seen as being close to full employment.

It has led Labour to revive its historical commitment to achieving full employment, something which would have been unthinkable as recently as 1997, when the party returned to power.

But a fierce debate is raging as to how much credit Labour can truly claim for the fall in unemployment.

Another question is whether the government's much-trumpeted 'welfare-to-work' programme has done enough to address underlying structural problems, such as the shortage of skilled workers and pockets of very high unemployment.

Labour has certainly benefited from a buoyant economy, which has brought the jobless total down.

But it is the New Deal, Labour's programme of subsidising training and jobs for the young and the long-term unemployed, which has most divided the critics.

THE NEW DEAL

Labour claims the New Deal is a major success story, helping the party to achieve one of its five key election pledges - of getting 250,000 under 25 year olds off benefits and into work.

The policy is radical by the standard of previous job creation schemes, forcing young people to comply with the programme or risk losing benefits.

Such a strong element of compulsion would have been unthinkable under previous Labour governments.

But it fits with New Labour's belief in giving 'people a hand-up, not a hand-out'.

If young people do not find work within three to four months of their first New Deal interview, they are offered either: a six month subsidised job placement; a placement with a voluntary organisation; a place on an environmental task force; or up to 12 months education or training.

Employers who take on the New Deal youngsters receive a £60 weekly rebate for six months.

Approximately 17,500 sanctions have been imposed on young people who turned down their options or were dismissed for misconduct.

And the penalty will be tightened if Labour is re-elected, so that those who refuse to take part will lose benefit for up to six months.

There will also be compulsory job interviews before any benefits are paid.

SOCIAL EXCLUSION

Harsh sanctions are necessary, Labour believes, to break the cycle of benefit dependency and long-term unemployment, which remain endemic in some parts of the country.

Nearly one in five children live in a household where no one is in paid work - double the proportion in 1979 and four times that in 1968.

Unlike the Conservatives, Labour believes this kind of long-term unemployment is inextricably linked to crime and the sub-culture of drugs, which has taken hold in inner cities and, increasingly, in rural areas.

The New Deal is part of a wider attempt to tackle 'social exclusion', with initiatives such as the Rough Sleepers Unit and the continuing war on teenage pregnancies, attempting to help people fulfil their potential and become more productive members of society.

EXTENDING THE NEW DEAL

The New Deal was introduced in 1998, funded by a £5bn windfall tax on the privatised utilities.

Since then Labour has extended it to cover an ever larger percentage of the workforce, starting with the over 25s, for those who have been unemployed for two years or more.

It is also available to lone parents and the partners of the unemployed, who can receive help to look for work.

Controversially, Labour is now extending the New Deal to cover disabled people and those on incapacity benefit, who will be assigned a "personal adviser" to help them into work.

Labour had been accused of ignoring the needs of the older long-term unemployed, as it pursues its target of lowering youth unemployment, so its latest extension of the New Deal will target older workers without a job.

Under its new proposals, the unemployed aged over 50 who move into a full-time job will be guaranteed a minimum income of £9,000 a year for the first 12 months and receive free advice and training.

The New Deal as a whole is expected to continue expanding under Labour, with more people coming under its umbrella.

"Our ambition of full employment is part of a deal; if you put in a fair day's work, the government will ensure that you are able to support yourself and your family," the party says in its manifesto.

AN EXPENSIVE FLOP?

Independent research has shown that many young people on the New Deal would have eventually found jobs of their own accord.

But Education and Employment Secretary David Blunkett has argued that speeding up the process is important, because it breaks the cycle of dependency and gets young people into the work habit.

But this has led the Tories to label the New Deal an expensive flop.

They claim it can cost more than £20,000 to put a single unemployed person into a job - money that might be better spent creating jobs elsewhere in the economy.

Another criticism is that some of the jobs found under the New Deal do not last.

The Tories have pledged to scrap the New Deal and replace it with 'Britain Works', which would, in effect, privatise the employment service.

Under their scheme, private contractors would be given the job of helping the long-term unemployed find work and would be given success fees.

The Tories would also implement their 'Can Work, Must Work Guarantee', which is designed to ensure that those who can work do so, or lose unemployment benefit.

Labour has also promised revisions to the benefits system, and has pledged to create a Working Age Agency, and JobCentre Plus, merging the old Employment Service and Benefits Agency.

The Liberal Democrats would replace the New Deal with a 'Flexible Guarantee' of help for all jobseekers, administered through a combined Benefits and Jobs Agency.

"This will be a world-class job search and placement service," the party promises in its manifesto.

TROUBLE AHEAD?

A glance at the latest figures would suggest that the steady fall in unemployment may be coming to an end.

This will not come as a surprise to those on the Left who have argued that - for all its talk of full employment - New Labour remains wedded to an economic policy which relies on a structural or 'background' level of unemployment (somewhere between 500,000 and 1million), to act as a brake on inflation.

Although the US economy has shown it is possible to have falling unemployment without soaring inflation, structural unemployment remains a factor in the calculations of the Bank of England Monetary Policy Committee, which sets interest rates.

The steady drop in unemployment has also been unevenly distributed around the UK.

Pockets of very high unemployment remain, particularly in the inner cities and remote rural areas such as the Scottish Highlands.

Clearly, for a large minority, job prospects have improved little since the 1980s.

People on the New Deal in some parts of Scotland and northern England will still have very little to look forward to at the end of their training.

Labour has consistently rejected the idea of a north/south divide, saying pockets of deprivation exist everywhere.

However, an investigation by the House of Commons Employment Select Committee found that "slack labour markets in certain parts of the country" are putting the government's plans in jeopardy, especially in the north.

In response, Chancellor Gordon Brown has promised to increase the budget of the eight regional development agencies he set up in 1999 by £500m, to £1.7bn by 2003-4, and allow them flexibility in how they spend it.

Labour has also put more money into its 15 Employment Zones, in partnership with the private sector.

The Liberal Democrats have promised to transfer cash for spending by regional and national authorities on local unemployment blackspots.

Local organisations are "best placed to spend the money effectively", in conjunction with regeneration spending, the party's manifesto says.

But there is little any chancellor can do to reverse the global economic trends which have concentrated prosperity - and jobs - in the South East of England.

Future governments will also have to deal with the chronic shortage of skilled staff in key industries such as IT and engineering and the difficulty of recruiting teachers, nurses and police officers.